Weinstein Co. Hits Back At $130M Fraud Lawsuit; “Will Not Succeed”

Just a day after making Oscar nomination predictions and showing clips from Quentin Tarantino’s Western The Hateful Eightat the Cannes Film Festival, the house of Harvey and Bob today repudiated a scathing multi-million dollar multi-claim complaint from the trustee of a bankrupt home video company. The recent filing (read it here) by Genius Product trustee Alan Siegel is “gravely mistaken,” says TWC’s lawyer. “The reality is that Genius’s distribution of TWC product was responsible for the lion’s share of all revenue that Genius received but Genius still failed to pay to TWC tens of millions of dollars due under the distribution agreements that TWC wrote off,” adds Alan R, Friedman of NYC firm Fox Rothschild.

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The trustee for Genius claims in a complaint in U.S. Bankruptcy Court in California that TWC has to hand back the more than $130 million the former paid out to latter starting nearly a decade ago and accept liability to Genius. Here’s the full statement by TWC’s lawyer in response:

“We think the Trustee’s claims are gravely mistaken and will not succeed. The story the Trustee wants to tell simply is not what happened and does not square with the facts. The agreements that the Trustee complains about were negotiated at arm’s length. The Weinstein Company was not on both sides of the negotiations.This is a matter of fact that cannot be disputed.

The agreements the Trustee complains about were approved by the Genius Board and its shareholders before The Weinstein Company ever had any business dealings or interest in Genius. This is reflected in the public SEC Proxy Statement Genius filed in 2006 (read it here) in which it explained to its shareholders that the very same agreements that the Trustee now challenges, many years later, were in the best interest of the Company. Not only did the Genius Board feel that way, but also its investment advisor, Jefferies & Company, did. Jefferies issued its opinion that the transactions that the Trustee is now challenging were fair from a financial point of view.

The reality is that Genius’s distribution of TWC product was responsible for the lion’s share of all revenue that Genius received but Genius still failed to pay to TWC tens of millions of dollars due under the distribution agreements that TWC wrote off. Further, Genius was controlled by the Quadrant Group, which is completely independent from TWC, beginning in January 2009, which was nearly three years before Genius’s bankruptcy.”

Having been in bankruptcy proceedings since 2011, Genius’ trustee Alan Siegel’s complaint alleges that TWC pillaged the home video operation almost from the time Harvey and Bob’s company created the outfit in 2005. Genius became an independent entity the next year but, holding onto 70% of it, TWC ran the place says Siegel. “While the Debtor was structured by Weinstein as an independent company in 2006 purportedly under independent management, the Debtor’s appearance of independence was a sham that was intended to and did mislead third parties,” the 19-page complaint says. “Weinstein (a) exercised ultimate control over all of the Debtor’s material business decisions for the benefit of Weinstein, (b) treated the debtor as an operating division of Weinstein for the benefit of Weinstein, and (c) dictated the terms of the Distribution Agreement and Amended Distribution Agreement for the benefit of Weinstein.”

After bleeding millions for over two years, Genius ran out of dough in 2008 and was taken over by Quadrant the next year. Later in 2009, the company ceased operation as its distribution rights assets were sold to Vivendi Entertainment. Even with having put home video products from the likes of ESPN and Sesame Street Workshop in big box stores, Genius went under in 2001 with almost $9 million in debt. This filing from trustee Siegel basically says that TWC’s alleged plundering of the place made Genius and others into unsecured creditors. The next question is what will the judge say here.